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                                                                  EXHIBIT 10.32

                               SEVERANCE AGREEMENT
                        AND GENERAL RELEASE OF ALL CLAIMS

         The intent of this Agreement and Release is to mutually, amicably 
and finally resolve and compromise all issues and claims surrounding the 
employment of STEPHEN FLORY, (the "Employee") by GATEFIELD CORPORATION, (the 
"Company") and the termination thereof. The execution of this Agreement shall 
not in any way be considered an admission of any liability on the part of the 
Company.

         1. The Company has notified Employee that his position is being 
eliminated as part of a reduction in force and that his employment with the 
Company is being terminated effective August 18, 1998. In exchange for the 
Release described below, the Company agrees to pay Employee the severance 
package as described in Section 2 below. This amount includes money which is 
not due to him now, or in the future, and which is valuable consideration for 
the promises and undertakings set forth herein.

         2. The Severance Package consists of the following:

         SEVERANCE PAY:

         The Company will continue to pay Employee his monthly base salary
payable on the 15th and last day of each month for a period of up to twelve (12)
months from August 19, 1998 through August 18, 1999 during which time Employee
shall be deemed an inactive employee. In the event Employee becomes re-employed,
these payments would cease at that time. Base salary does not include FSA, car
plan payments, or bonuses. The period of time that Employee is receiving
Severance Pay shall be deemed the Severance Period.

         VACATION PAY:

         The Company will pay Employee the equivalent of two (2) weeks vacation
pay payable on August 31, 1998.

         GROUP INSURANCE:

         Employee's group coverage for medical, dental, life, AD&D, LTD and
Supplemental Life will remain in effect through such period of time as Employee
is paid Severance Pay as stated above. At that time, Employee may elect COBRA
coverage.

         COMPUTER:

         Employee will be provided with the Company computer he has used during
his employment with the Company except for any peripheral computer accessories
and equipment, e.g. the scanner, which will stay with the Company. Employee
agrees to copy all business files and records that are stored on this computer
onto a Company computer or drive.

         OTHER BENEFITS:

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         401 (k) PLAN:

         Employee's participation in the Company's 401 (k) Plan will cease upon
termination of Severance Pay as stated above. The Company will not be liable for
matching contributions after August 18, 1998. Employee will receive a lump sum
distribution for the amount of Employee's vested account balance within
approximately 90 days after ceasing participation in the Plan. If Employee's
vested account balance is greater than $3,500, Employee may elect to leave his
money in the Plan.

         STOCK OPTION PLAN:

         Employee is vested in the Company's stock option plan as follows:

<TABLE>
              <S>                 <C>
              -   Q4 1997         Vested options - 58,825
              -   Q1 1998         Vested options - 18,218
              -   Q2 1998         Vested options - 19,290
              -   Q3 1998         Vested options - 21,433

                  TOTAL VESTED OPTIONS - 117,766
</TABLE>

         Employee has until 90 days after the date of termination of the
Severance Pay as stated above to exercise these vested stock options. There
shall be no further vesting of stock options. The Q4 1997 stock option bonus
plan shall apply to the Q4 1997 vested options when such options are exercised.

         STOCK PURCHASE PLAN:

         Employee may either remain in the Plan for the duration of the third
quarter 1998 or elect to withdraw from the Plan and receive a refund. If
Employee remains in the Plan, Employee's certificate and any remaining balance
will be mailed to him in November 1998.

         MISCELLANEOUS:

         Employee shall be entitled to keep a voice mail extension and an email
account during the Severance Period. Employee shall be entitled to use part time
administrative support from Cindy Brinkmann for handling any communication that
comes to Employee in care of the Company. In addition, Employee may continue to
use the Company's Club Sport membership during the Severance Period or for so
long as the Company keeps such membership, whichever occurs first.

         3. Employee agrees that the terms and conditions of this Agreement are
strictly confidential and shall not be disclosed to any other persons except his
counsel, immediate family, financial advisor or as required by applicable law.

         4. In consideration for the payment and undertakings described above
Employee, his representatives, successors, and assigns, do hereby completely
release and forever discharge, the Company, its parent, affiliated and
subsidiary corporations, and its shareholders, officers and all other
representatives, agents, directors, employees, successors and assigns, from all
claims, rights, demands, actions, obligations, and causes of action of any and
every kind, nature and character, know or unknown, which Employee may now have,
or has ever had, against them arising from or in any way 

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connected with the employment relationship between the parties, any actions
during the relationship, or the termination thereof, including but not limited
to all "wrongful discharge" claims; and all claims relating to any contracts of
employment, express or implied; any tort of nature; any federal, state, or
municipal statute or ordinance; any claims under the California Fair Employment
and Housing Act, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967, 42 U.S.C. Section 1981 and any other
laws and regulations relating to employment discrimination any and all claims
for attorney's fees and costs.

         5.  Employee has read Section 1542 of the Civil Code of the State of 
California, which provides as follows:

         A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
         KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
         RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
         SETTLEMENT WITH THE DEBTOR.

         Employee understands that Section 1542 gives him the right not to
release existing claims of which he is not now aware, unless he voluntarily
chooses to waive this right. Having been so apprised, he nevertheless hereby
voluntarily elects to, and does, waive the rights described in Section 1542, and
elects to assume all risks for claims that now exist in his favor, KNOWN or
UNKNOWN, from the subject of this Agreement.

         6. This Agreement shall act as an assignment to the Company of any
capital stock held by Employee in a foreign subsidiary of the Company.

         7. This Agreement constitutes the entire understanding of the parties
on the subjects covered. Employee expressly warrants that he has read and fully
understands this Agreement; that he has had the opportunity to consult with
legal counsel of his own choosing and to have the terms of the Agreement fully
explained to him; that he is not executing this Release in reliance on any
promises, representations or inducements other than those contained herein; and
that he is executing this Release voluntarily, free of any duress or coercion.

                                               GATEFIELD CORPORATION

Dated:  August 17, 1998                        By:  /s/ James R. Fiebiger, CEO

Dated:  August 18, 1998                        By: /s/ Stephen Flory, Employee